Tobacco War: "d0e1632"

The Napkin Deal

Tort reform was an active issue before the Legislature at the same time as ACA 14, and the CMA needed to protect its Malpractice Insurance Compensation Reform Act (MICRA). In 1975 the CMA had persuaded the Legislature to pass MICRA, which capped medical malpractice judgments and the size of trial lawyer contingency fees. MICRA had launched an ongoing fight about product liability among doctors, trial lawyers, insurance companies, manufacturers, and others, with everyone willing to make substantial campaign contributions to block everyone else from getting what they wanted through the Legislature.

The manufacturers and insurance companies, tired of dealing with

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the Legislature, had used the initiative process to pass Proposition 51 in 1986. Proposition 51 ended the legal doctrine of “joint and several liability” whereby the wealthiest defendants in multi-defendant lawsuits paid the vast majority of the damages if other defendants did not have the resources. The insurance companies were willing to go to the ballot again to pass an even more favorable law. On the other side, the trial lawyers and consumer groups were willing to try to pass their own initiative that would make it easier to sue and recover damages.

On September 10, 1987, Assembly Speaker Willie Brown (D-San Francisco), who had by the end of the 1988 election cycle received $125,900 in campaign contributions from the tobacco industry, hosted a dinner meeting at Frank Fat's, a Sacramento restaurant popular with Capitol movers and shakers.^[28]^[29] He invited the trial lawyers, the CMA, and the insurance companies to work out a tort reform deal that would accommodate all of their interests and avoid a very costly initiative battle. They were joined by the tobacco industry.

The dinner guests (public health and consumer groups were excluded) worked out a nonaggression pact in which everyone at the table got something. Insurance companies got protection from lawsuits and avoided regulation of their industry, doctors kept their existing liability protections and got a higher standard of proof that a victim had to meet to receive damages, and trial lawyers got larger contingency fees to compensate them for the fact that the cases would be harder to win. The tobacco industry (and producers of castor oil, butter, sugar, and alcohol) got virtual immunity from lawsuits based on consumer use of its “inherently” unsafe product.^[29]

The deal was written on a napkin; the “Napkin Deal” emerged as a legendary political deal in Sacramento.^[29]^[30] The resulting bill, introduced by Senator Bill Lockyer (D-Hayward), was the subject of a perfunctory one-hour committee hearing, went to the floor (where it was blocked from amendment by the leadership), and passed by a wide margin.

The tobacco industry clearly understood the intimate connection between MICRA and the tobacco tax initiative insofar as it related to the CMA. In its report to Mozingo of the Tobacco Institute, dated September 24, 1987, shortly after the Napkin Deal was enacted into law, A-K Associates analyzed the CMA's position:

To date organized medicine has stayed out of the [tobacco tax] initiative fight. In all honesty, luckily, the CMA's primary objective was tort reform and they planned to use the bulk of their resources in sponsoring a tort reform Initiative at the same time as the tobacco tax Initiative would be on the ballot if it
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should qualify. Obviously, we used this to our great advantage in convincing CMA to stay out of the tax initiative. During the last day of the 1987 California legislative session, the trial attorneys and the proponents of tort reform came to a political compromise which was subsequently enacted by the legislature. As part of this compromise there was an agreement to a five year moratorium on tort reform initiatives agreed to by all parties, including the CMA. This could potentially open up the CMA to re-thinking their position in regard to the proposed tobacco tax initiative. We are duplicating all of our previous efforts to assure that this does not happen.^[7] [emphasis in original]

The industry understood how central the malpractice insurance reform issue was to the CMA, more central than Proposition 99. The CMA would be willing to make some trades to get the tobacco industry's support. When Roger Kennedy, a Santa Clara County physician who was active in both tobacco control and the CMA, was asked whether he was surprised when the CMA signed off on the Napkin Deal, he said, “I think that it was something that was so important to the leadership at that time. …In order to preserve that MICRA…they probably would have done almost anything. Because that was number one.”^[31]